Win, Lose, or Draw: 2022 Construction Industry Outlook
The red-hot North American construction market just keeps getting hotter. Unfortunately, the most urgent issue of 2022 is going to be shortages – shortages in materials, shortages in labour, and shortages in time.
If your construction organization is struggling with any of these shortages, you can expect your projects won’t complete and your bottom line will take a hit.
Interestingly, this creates a real opportunity for organizations that are managing the risks well. Whether it’s securing appropriate insurance coverage or taking advantage of modular construction or other emerging technologies to recruit talent and manage projects efficiently, there is room for construction companies to demonstrate resilience and succeed.
Here’s What to Expect in Construction in 2022:
1. Supply chain disruptions become the new normal
Supply chains were the big story last year – and they will continue to make headlines in 2022. Whether the culprit was COVID-19 or a natural disaster, materials are in short supply (1) and contractors are struggling to finish jobs on time and on budget.
The winter storm that pounded the southern United States shut down production of chemicals used in making roofing membranes, making them almost completely unavailable. (2) And that infamous lumber shortage is slowly righting itself — futures per thousand board feet were US$610 in early November, down from a record US$1,711 in May but still far up from about US$250 in April 2020. (3)
These shortages affect everything, from costs to schedules and budgets. Contractors may consider themselves lucky if they can overpay for materials and stockpile them. If they can’t, they may find themselves scrambling to extend expiring builders’ risk policies.
The key to mitigating supply chain issues comes down to resilience: Do you have backup solutions in place? How can you pivot? It’s a good idea to identify and create relationships with local and regional suppliers – and reconsider reliance on foreign-made supplies and just-in-time materials sourcing.
2. Alternative materials come into their own
Alternative materials – think mass timber or bendable concrete – have been much discussed for some time. In 2022, that train will finally be leaving the station.
Once a solution that attracted only the most committed environmentalists, alternative materials today offer the same benefits as traditional materials – or better – and may even be easier to source when supply chains are broken. For example, cross-laminated timber boasts additional strength and improved fire resistance over traditional lumber. Bendable concrete has greater durability than regular concrete, which reduces the need for repairs.
These materials can be costly, and they won’t help you avoid supply chain challenges completely. But, because of other benefits, they may be worth considering. Don’t forget to check the insurance implications, including the effect on property, general and product liability coverage.
3. Recruiting focuses on younger workers
It’s the awkward reality that although construction is booming across North America, it’s also an industry with a serious labour shortage. By 2030, the average Canadian construction worker will be 42 years old, and young people aren’t interested in construction jobs. (4) Over the next decade, firms will need to recruit nearly 310,000 construction workers to replace those retiring and to meet demand; one report estimates the industry could be short 81,000 workers by 2030. (5)
With a median annual wage of roughly $57,000, (6) the pay may not appeal to younger workers, given the nature of the work. Paid apprenticeship training programs are one solution, and vocational skills training programs especially help retention.
The good news is, new trends within the industry may hold the most promise for recruitment. Young workers are motivated by technology – and drones, robotics, and digital tools are all growing areas. In fact, younger workers may be in demand more for their technical skills than their brawn, boosting entry-level wages (7).
When it comes to attracting reluctant talent, modular construction may be an attractive option for those who don’t like the idea of working outside. And offering voluntary employee benefits can also give contractors an edge in attracting new employees.
4. Tech options bring greater benefits as well as risks
Technology stands to improve the construction industry’s productivity as much as 60 per cent, delivering as much as $1.6 trillion annually in incremental value. (8) It is no shock then that more construction organizations are relying on technology than ever before, whether it is the skyrocketing use of drones (9) or the beginning of industrial-scale 3-D printing. Even project management tools make use of smart technology to make scheduling and budgeting more efficient, and wearable sensors are improving safety records.
On the other hand, technology brings with it the risk of cybercrime, whether it is ransomware, social engineering, or other cyber attacks. One recent study showed that 75 per cent of construction-related firms had experienced a cyber incident in the previous 12 months. (10)
The bottom line is this: Cyber insurance is no longer optional. Attacks are increasing in size and complexity, and the losses can be devastating. Expect cyber insurance premiums to increase 20 per cent or more in 2022 – but work it into your budget, whatever happens.
Resilience is the name of the game. With planning and risk mitigation strategies in place, construction companies can learn to navigate the labour shortages, financial uncertainties and supply chain woes – and achieve success.
The best way to get there is by working with a broker. The right broker has the knowledge and experience of the industry and its insurance players and can help secure the right insurance in the right amounts for the lowest cost.
About the Author
Doug Lyall is Chief Sales Officer of global insurance brokerage Hub International in Alberta. With a long background in the construction industry coupled with his growing up in Canadian prairie farm and ranch country, Doug understands the business needs of locally-based businesses in a globally impacted economy. He has spent his career developing insurance plans and products focused on providing industry-leading options to both segments of business and brings that depth of experience to his leadership role.
- Ontario Construction News, “Construction supply chain shortage still causing major problems,” September 29, 2021.
- Sika Sanafil, “What the Heck is Happening with Roofing!?” August 8, 2021.
- Trading Economics, Chicago lumber futures, accessed November 5, 2021.
- BuildForce Canada, “Construction and Maintenance Looking Forward: National Summary,” March 2021.
- Canada Immigration News, “As Canada’s Economy Rebounds, Construction Industry Needs Hundreds of Thousands of Workers,” June 18, 2021.
- Statistics Canada, “Salaries and Wages,” accessed October 29, 2021.
- ConstructConnect, “Using Construction Tech to Attract Younger Workers,” April 5, 2019.
- McKinsey, “The next normal in construction,” June 2020.
- ConstructConnect Daily Commercial News, “Inside Innovation: Drone usage set to take off in 2021,” May 12, 2021.
- Forrester, “Cybersecurity Trends,” September 13, 2021.